FX challenges worsened by $40bn spent on foreign education, medical tourism — Cardoso

…BDC to undergo overhaul as Cardoso targets currency hoarders

…Says CBN’s bold reforms lead to $800m in forex transactions

By Sodiq Adelakun

In an address to the House of Representatives on Tuesday, Yemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), raised concerns over the substantial foreign exchange spent on foreign education and medical tourism, which he believes is contributing to the country’s economic challenges.

Governor Cardoso revealed that Nigerians have spent an alarming $40 billion on overseas education and healthcare over the past decade.

He pointed out that from 2010 to 2020, $28.65 billion was directed towards educational expenses abroad, with medical tourism accounting for an additional $11 billion.

The CBN Governor emphasised that the massive outflow of foreign exchange for these services has had a significant impact on the value of the Nigerian Naira, which has seen a sharp decline to over N1,400 in the official market.

He noted that the total amount spent on these foreign services even surpasses the nation’s total foreign exchange reserves. Cardoso suggested that if a considerable portion of this demand had been mitigated, the Nigerian currency could have been in a much stronger position today.

The revelation comes as Nigeria grapples with economic pressures and seeks solutions to stabilise its currency and improve its balance of payments.

“Similarly, medical treatment abroad has entered around $11 billion in costs during the same period. Consequently, over the past decade, foreign exchange demand for education and healthcare has totaled nearly $40 billion.

“Notably, this amount surpasses the total foreign exchange reserves of the CBN. Mitigating a significant portion of this demand could have resulted in a considerably stronger naira today.”

The CBN has been actively managing these expenditures through its approved rate for school fees and healthcare payments. Cardoso pointed out a notable shift in the pattern of demand for Personal Travel Allowance (PTA) for overseas education fees, a trend that has evolved considerably since the early 1990s.

The Central Bank Governor projected that the number of Nigerian students abroad is set to surpass 100,000. This trend underscores the increasing international educational aspirations of Nigerian students and the significant financial implications for the country’s foreign exchange reserves.

Cardoso also revealed plans to introduce a new foreign exchange operation mechanism for the operation of the Bureau de Change segment and tackle currency hoarding.

…CBN’s bold reforms lead to $800m in forex transactions

Also, the CBN governor announced that recent reforms are starting to have a positive impact on liquidity in the foreign exchange market.

The volume of transactions in the market reached over $800 million, the highest level in many years.

The Governor stated that the country is at a turning point and that bold reforms are underway across different segments of the economy.

The naira has depreciated significantly against the dollar since 26 January, following measures taken by the central bank to align the official market value closer to the parallel market, as part of an ongoing effort to bridge the gap between the rates at the NAFEM window and the parallel market.

He stated, “As of yesterday, the volume of transactions in our market was over $800 million. This is the first time in many years it has achieved this level.

“I want to emphasise that we are now at a turning point and bold reforms are underway across different segments of the economy. I’m confident that positive outcomes are already emerging and will become more apparent shortly.”

The Nigerian naira has experienced a significant decline against the US dollar in recent weeks, following measures taken by the central bank to align the official market value with the parallel market.

This move is part of a wider effort to reduce the gap between the rates at the NAFEM window and the parallel market.

The scarcity of dollars in the domestic market has contributed to the currency’s weakness, prompting the central bank to urge Nigerians abroad to repatriate their funds through official channels.